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Counsel Financial Services, LLC v. David Mcquade Leibowitz and David Mcquade Leibowtz

March 26, 2012


The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court



Plaintiff Counsel Financial Services ("CFS") commenced this action on November 25, 2009, seeking an order (1) granting it costs and attorneys fees expended in defending claims brought in violation of a forum-selection clause and (2) permanently enjoining Defendants from litigating in Texas any claims or defenses that are subject to the forum-selection clause. (Docket No. 1.) CFS contemporaneously filed a Motion for Preliminary Injunction, seeking the same injunctive relief. (Docket No. 2.) The next month, on December 29, 2009, Defendants David McQuade Leibowitz and his self-entitled law firm, David McQuade Leibowtz, P.C. (collectively "Leibowitz"), moved to dismiss, or in the alternative, abate this action. (Docket No. 7.)

On March 17, 2010, CFS filed a Motion for Temporary Restraining Order ("TRO") to prevent Defendants from pursuing their own injunction in the 370th Judicial District Court of Hidalgo County ("Hidalgo Court"), but this Court denied that motion on March 18, 2010. (Docket Nos. 17, 18.)

Thus, presently before this Court are Leibowitz's Motion to Dismiss or Abate and CFS' Motion for a Preliminary Injunction. For the following reasons, both motions are denied.


CFS, a Delaware company with its principle office in Williamsville, New York, provides loans to law firms and lawyers handling contingent-fee cases. (Complaint ¶ 1; Docket No. 1.) In this capacity, CFS executed a Promissory Note ("Note") and a Security Agreement (providing CFS collateral in Leibowitz's future attorneys fees) with Leibowitz in exchange for a five million dollar loan to Leibowitz's law firm.*fn2 *fn3 (Id., ¶ 4.) Thereafter, alleging default and failure to pay, CFS filed a lawsuit against Leibowitz in the Supreme Court of the State of New York, Erie County. (Id., ¶ 5.) On or about November 25, 2008, CFS obtained a judgment against Defendants in the amount of $5,506,180.96. (Id., ¶ 5, Exhibit E of the Complaint.) Defendants appealed, but the New York Appellate Division, Fourth Department, affirmed the order and judgment on November 20, 2009. (Complaint, ¶ 24; Exhibit F of the Complaint.)

While Leibowitz's New York appeal was pending, in August of 2009, CFS moved to intervene in a personal injury action pending in the Hidalgo Court in which Leibowitz was plaintiff's counsel. (Motion to Intervene, Exhibit C of the Motion to Dismiss; Docket No. 7)

CFS sought intervention to assert its entitlement -- as secured creditor, judgment creditor, and lienholder -- to costs and attorneys fees it anticipated that Leibowitz would receive as part of the settlement of the personal injury matter. (Id.) Leibowitz, in response, also sought to intervene in that action, in his personal capacity, to oppose CFS's proposed intervention. (Complaint ¶ 28; Exhibit G of the Complaint.) Among other things, Leibowitz alleged that it was CFS who breached the Security Agreement, and sought various declaratory and injunctive relief. (Id.) For example, one "counterclaim" alleges that:

CFS has breached and defaulted under the terms of the Security Agreement by wrongfully accelerating the terms of the Note, charging interest on the Note which they had no right to charge, and by charging fees and expenses which Leibowitz never agreed to pay. (Answer to Plea in Intervention in Hidalgo Court, § 4.1.7, Exhibit G of Boyle Affirmation; Docket No. 3-3.)

Leibowitz also asserted that CFS has "filed numerous interventions in cases in numerous state and federal district courts making baseless claims with the intent to threaten and intimidate, and multiply the litigation between the parties." (Id., § 2.5.) Leibowitz ultimately sought a temporary injunction restraining CFS from attempting to collect on the New York judgment until that judgment was domesticated by an order of a Texas Court and all appeals were exhausted. (Complaint, ¶ 28.) He also sought to restrict CFS from enforcing its judgment, or making any claim under the Note, in any court except the Hidalgo Court. (Answer to Plea in Intervention, §§ 5.4.2, 5.4.3.)

CFS subsequently removed the Hidalgo Court action to the United States District Court, Southern District of Texas, where it remained until March 8, 2010 when the federal court remanded the action back to state court. On remand, the Hidalgo Court granted Leibowitz's injunction; but that decision was reversed on July 1, 2011 by the Court of Appeals of Texas, which ruled that: (1) under the Uniform Enforcement of Foreign Judgments Acts, the New York Judgment was entitled to Full Faith and Credit in the Texas court system, and (2) the trial court abused its discretion in granting Leibowitz an anti-suit injunction. Counsel Fin. Servs., LLC v. Leibowitz, No. 13-10-0200-CV, 2011 WL 2652158, at *8-*13 (Tex. App. July 1, 2011).*fn4


A. Leibowitz's Motion to Dismiss

1. Standard -- Rule 12(b)(6)*fn5

Rule 12 (b)(6) allows dismissal of a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12 (b)(6). Federal pleading standards are generally not stringent: Rule 8 requires only a short and plain statement of a claim. Fed. R. Civ. P. 8(a)(2). But the plain statement must "possess enough heft to show that the pleader is entitled to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1966, 167 L. Ed. 2d 929 (2007).

When determining whether a complaint states a claim, the court must construe it liberally, accept all factual allegations as true, and draw all reasonable inferences in the plaintiff's favor. ATSI Commc'ns, ...

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